Friday, January 21, 2022
HomeBUSINESSState pension changes will leave pensioners out of pocket in 2022 |...

State pension changes will leave pensioners out of pocket in 2022 | Personal Finance | Finance

As the COVID-19 pandemic continues to impact the finances of Britons, retirees enter an unusual year when it comes to their weekly income. Changes to the framework of how the state pension is increased will come into effect in a matter of months, but how will pensioners be impacted?

Triple lock suspension

The Government kicked up a storm in September 2021 when it was announced that the state pension triple lock would be temporarily suspended, but it is only now the calendar has flipped over to 2022 that the consequences of that decision loom.

The triple lock policy was first implemented in 2010 to guarantee the state pension income of Britain’s retirees would increase by an acceptable amount each year, allowing them to maintain their spending power over time.

Under the terms of the triple lock, the state pension must increase every year by the higher of three figures. These are inflation, average earnings growth, and 2.5 percent.

READ MORE: Is state pension deferral worth it? Thousands of pounds available but beware of risks

They therefore decided to temporarily suspend the earnings link element of the triple lock for the upcoming tax year, as they believed it would be unfair to taxpayers to issue such a large increase to the state pension.

By removing the earnings link, the triple lock has essentially become a ‘double lock’ for 2022/23, with the state pension now set to increase at just 3.1 percent from April.

While that still marks the third-highest boost to the state pension since the triple lock was brought in, it is less than half the increase pensioners were expecting.

This was no doubt made more disappointing for retirees given the fact that inflation has surged since the 3.1 percent increase was locked in, rising to 5.1 percent for the 12 months to November 2021.

A 3.1 percent boost means the new full state pension will go from £179.60 per week to £185.16 per week.

That adds up to an additional £289.12 for the year, taking the amount for a full 12 months from £9,339.20 to £9,628.32.

The full basic (old) state pension will increase from £137.60 to £141.86 each week, adding an extra £221.52 to pensioners’ pockets across the course of the tax year.

Retirees who get the full basic state pension will therefore receive £7,376.72 in 2022/23 as opposed to the £7,155.20 for the 2021/22 tax year.


Most Popular

Recent Comments


    Powered by WhatsApp Chat

    × How can I help you?